Brad DeLong: Worthy reads on equitable growth, August 16–23, 2019

Worthy reads from Equitable Growth:

1. I am skeptical of claims of wage stagnation over the past 40 years in the United States. Our modern information and communications technologies are worth a good deal, as is pollution control. I think the argument is better made in the sense of Karl Polanyi: People thought that they would have a certain style of middle-class life, but stagnant paid wages and rising housing and other prices have led to grave disappointment. It is not the future that people in the past had ordered, and so many are very upset. Read Heather Boushey “In Conversation with Gabriel Zucman,” in which Zucman notes: “Even this mediocre growth performance is much more than what’s been experienced by most of the population. Almost 90 percent of the population has seen its income grow by less than that. And for half of the U.S. population—about 120 million adults today—there’s been zero growth in average pretax income since 1980. This means that in 1980, for the bottom 50 percent, average income before government intervention was $16,000 a year, adjusted for inflation. Today, it’s still $16,000 a year. That’s a generation-long stagnation in income for half of the population.”

2. Kate Bahn thinks about the “fissured workplace” interacting in your daily life with people of other social classes as valued colleagues. This is, perhaps, a powerful glue holding the society together that we have, to a substantial extent, lost. Read Kate Bahn, “Domestic outsourcing of jobs leads to declining U.S. job quality and lower wages,” in which she writes: “One prototypical example is janitorial work, where most office cleaners today are employed by a janitorial services company that is contracted by the building owner where individual office places lease their space. These kinds of fissured employment patterns have led economists and other social science researchers to examine a variety of empirical research questions about what has caused domestic outsourcing, what the impacts have been and for whom, and what the future of the firm will be.”

3. So far, it looks like a very good benefit-cost ratio for California’s paid leave program. Read Katherine Policelli and Alix Gould-Werth, “California Paid Family Leave reduces poverty,” in which they write: “Between 2004 and 2013, the California paid leave program increased household income levels and lowered poverty rates for mothers of 1-year-olds … an average $3,407 increase in income … Also … good news specific to the bottom end of the income distribution: The introduction of paid leave in California is tied to a 10.2 percent decrease in risk of new mothers dropping below the poverty threshold and disproportionately helps women with lower levels of education and who are unmarried.”

Worthy reads not from Equitable Growth:

1. I am, usually, a strong advocate of “play your position.” And I try to practice what I preach. But this week I cannot. Here is President Donald Trump in the past explaining why Jay Powell was his choice to be chair of the Fed: “That is why we need strong, sound, and steady [pause] leadership at the United States Federal Reserve. I have nominated Jay to be our next Federal Chairman. [pause] And so important, because he will provide exactly that type of leadership. He’s strong. He’s committed. He’s smart. And, if he is confirmed by the Senate, Jay will put his considerable talents to work, leading our nation’s independent central bank. Jay has learned the respect and admiration of his colleagues for his hard work, expertise, and judgment. Based on his record, I am confident Jay has the wisdom and leadership to guide our economy through any challenges that our great economy may face.”

2. And now here is President Trump, complaining because Jay Powell is following the monetary policy that Trump knew he would follow when he nominated him: “Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to “will” the Economy to be bad for purposes of the 2020 Election. Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world. The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!.” Is Trump trying to convince his base that Jay Powell was somehow the choice of the dastardly Democrats rather than his own choice? Has Trump forgotten that Jay Powell was his choice and is doing what Trump chose him to do? I used to think that there was some method here. But now the signs of cognitive decline seem strong enough that I do not think it wise to make that assumption.

3. Okay, back, finally, to playing my position. We now have, or ought to have, the information sources to create much more finely grained and much more accurate economic and social indicators. We should work hard to do so. Read Joseph Stiglitz, Martine Durand, and Jean-Paul Fitoussi, “Who Are You Going to Believe, Me or the Evidence of Your Own Eyes?,” in which they write: “We need to develop datasets and tools to examine the factors that determine what matters for people and the places in which they live. Having the right set of indicators, and anchoring them in policy, will help close the gap between experts and ordinary people that are at the root of today’s political crisis … The Stiglitz-Sen-Fitoussi Commission … final report was published in 2009 … The production of goods and services in the market economy—something which [Gross Domestic Product] does try to capture—is of course a major influence, but even in the limited domain of the market, GDP doesn’t reflect much that is important. The most used economic indicators concentrate on averages, and give little or no information on well-being at a more detailed level, for instance how income is distributed … Economic insecurity today is only one of the risks individuals face … The Group considered how to better measure the resources needed to ensure economic, environmental and social sustainability.”

4. The very sharp Martin Wolf fears that attachment to Modern Monetary Theory may produce predictable distortions in politicians’ thoughts. Read his “States Create Useful Money, but Abuse It,” in which he writes: “What then are the problems with MMT? … Suppose holders of money fear that the government is prepared to spend on its high priority items, regardless of how overheated the economy might become … fear that the central bank has also become entirely subject to the government’s whims … They are then likely to dump money … The focus of MMT’s proponents on balance sheets and indifference to expectations that drive behaviour are huge errors … If politicians think they do not need to worry about the possibility of default, only about inflation, their tendency may be to assume output can be driven far higher, and unemployment far lower, than is possible without triggering an upsurge in inflation.”